State Needs To Ramp Up Its Commitment To Small Businesses

With all of the big news in late June about $1 billion in new foreign investment in South Carolina, it’s time for the state to pay more attention to the little guy and small businesses.

The new state budget includes $40 million as a “closing fund” to seal deals with big new companies such as Samsung, which announced a $380 million investment this week in Newberry County that will create 950 new jobs. Also in recent days, BMW announced it would invest $600 million more in its Upstate car plant, which will add 1,000 more jobs by 2021.

All of this investment is good. Last year according to the S.C. Department of Commerce, South Carolina recruited more than $3.4 billion in capital investment, which is expected to create 13,100 new jobs that we need across the state.

But the focus on big investment begs the question about how much help there is for small businesses, which the Commerce Department’s website touts as comprising 97 percent of South Carolina’s private employers.

The answer is peanuts, according to Frank Knapp, president of the S.C. Small Business Chamber of Commerce.

“There is not the same type of statewide publically-funded emphasis on growing small businesses,” Knapp said. “What is our state plan for growing small business?”

If budgets serve as indicators of a state’s public policy priorities, then South Carolina’s new 2017-18 budget is instructive.

The S.C. Commerce Department will get $171.8 million in total funds so “businesses great and small can prosper,” according to its website. State tax dollars account for $45 million of the agency’s budget.

Of the agency’s 113 employees, 11 – just under 10 percent – are dedicated to its mission to help small business and existing industry. That section of the agency is budgeted to get $2.4 million in total funding, two thirds of which is from state tax dollars.

So if small businesses are the economic backbone of the state – something politicians like to tout at election time – and if small businesses comprise an overwhelming majority of private employers, why is only 1.4 percent of the Commerce Department’s budget spent on those very same small businesses?

It’s because the agency is mostly focused on landing big new companies and expanding existing big companies.

In a lot of ways, the strategy is easier and has a bigger, more immediate payoff, particularly in a poor state where the global business environment finds rising labor costs in places like China. At the same time, the current political situation in the United States encourages American-made products. In this atmosphere, it may be easier to lure a foreign company to build its products in America to ensure access to the American market.

“They’re going to go to where it is more advantageous to them – close to the market and a very good port,” Knapp said. “We’ve got plenty of land and we’ve got plenty of labor.

“We pay for locations for them. We give them big monetary incentives to come here. We develop specific infrastructure for them,” he said, noting interstate interchanges to connect industries to the state’s transportation network. “We will invest in water, utilities. We’ve invested in these industrial parks. We build those with public money.”

For the last nine years, Statehouse Report has called for the state of South Carolina to do more to grow small businesses. As highlighted in our Palmetto Priorities for South Carolina: “Approve a Cabinet-level post by 2020 to add and retain 10,000 small business jobs per year. Politicians talk about helping small businesses. This would force them to.”

With so much being spent trying to lure big companies and with the state’s unemployment rate comparatively low thanks to years of industrial successes, it makes sense to start shifting state priorities to home-grown, small business jobs, which may be more stable than industries that can pack up and leave if the economy shifts.

Let’s add $10 million a year in state funding that’s dedicated to doing the hard work of helping people start and maintain small businesses. It’s easy to put suggestions and tools on a website outlining how entrepreneurs can begin. It’s harder to get out in the field and work hand-in-hand with people to build their American dreams.